Exam (elaborations)
NMLS SAFE EXAM CONTAINING QUESTIONS AND ANSWERS
NMLS SAFE EXAM CONTAINING QUESTIONS AND ANSWERS
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NMLS SAFE EXAM CONTAININGQUESTIONS AND ANSWERS
Primary Mortgage Market - Answer Where credit institutions originate loans
C. The maximum the rate can increase over the life of the loan - Answer When an ARM has
rate caps of 5/2/6, the 6 refers to what?
A. The maximum rate increase at the initial adjustment
B. The start rate for the loan
C. The maximum the rate can increase over the life of the loan
D. The rate maximum the rate can decrease over the life of the loan
B. The borrower qualified at the buydown rate - Answer When utilizing a temporary buydown
to lower the interest rate on a FHA loan, which of the following are correct
A. The borrower qualified at the note rate
B. The borrower qualified at the buydown rate
C. The rate cannot be more than 2% below the note rate
D. Seller or builder can pay the discount points to buydown the rate
A. Age - Answer All of the following are violations of the Fair Housing Act EXCEPT
A. Age
B. National Origin
C. Disability
D.Religion
Encrumbrance - Answer Claim against property held by one who is not the legal owner
Trigger Term - Answer Advertised term that requires additional disclosures
Advertising Disclosure - Answer An advertisement must be presented "clearly and
conspicuously" to keep from being deceptive, unfair, or otherwise violate a Commission rule
Waving Right of Rescission - Answer Extenuating circumstances such as "bona fide personal
financial emergency
Right of Rescission - Answer Right that borrowers have to cancel a loan or line of credit with a
lender within three days of closing
Business Day - Answer When creditors office is open to the public, a calendar working day
except Sunday or a federal holiday
Application - Answer Financial information used for purposes of obtaining an extension of
credit
Disclosure - Answer The act of making new information known
,NMLS SAFE EXAM CONTAINING
QUESTIONS AND ANSWERS
FTC
Federal Trade Commission - Answer Mission is to promote consumer protection and eliminate
and prevent anticompetitive business practices
CFPB
Consumer Financial Protection Bureau - Answer Regulatory agency charged with overseeing
financial products and services offered to consumers
TILA
Truth in Lending Act - Answer Enacted 1968 promotes the informed use of consumer credit by
requiring disclosures about terms and costs and standardizes the manner in which costs with
borrowing are calculated and disclosed
Per Diem Interest - Answer Interest charged on a loan for one or more days
Annual Interest Rate Formula - Answer Principal (X) Interest Rate = Annual Interest Rate
Interest Only Mortgage - Answer Mortgage where the mortgagor is only required to pay off the
interest that arises from the principal that is borrowed for a set period
Permanent Buydown - Answer Borrower chooses to pay additional "discount points" to buy
down the interest rate for the life of the mortgage note
2/1 Buydown - Answer Used on fixed rate loans over two years
Set of two initial temporary-start interest rates that increase in stair-step fashion until a
permanent interest rate is reached
Discount Point - Answer A form of pre-paid interest which effectively increases the yield on
the loan above the amount of the stated interest rate
CLTV
Combined Loan to Value - Answer An amount in addition to the Loan to Value, which simply
represents the first position mortgage or loan as a percentage of the property's value
LTV
Loan to Value - Answer Ratio of a loan to the value of an asset purchased
PITI - Answer Principal, Interest, Taxes, Insurance
Refers to the components of a mortgage payment
DIF - Answer Housing to Debt
Ratio that measures an individual's ability to manage monthly payment and repay debts
,NMLS SAFE EXAM CONTAINING
QUESTIONS AND ANSWERS
Forbearance - Answer Agreement between the lender and the borrower to delay foreclosure
Loan Modification - Answer A permanent restructuring of the mortgage where one or more of
the terms of a borrower's loan are changed to provide a more affordable payment
Foreclosure - Answer Legal process to collect debt on mortgaged property
Satisfaction of Mortgage Letter - Answer Document generated and signed by a mortgage
lender, acknowledging that the borrower has paid off the mortgage loan in full and the mortgage
is not a lien on the property
Subordination Agreement - Answer When two mortgages are on a property, this specifies
which mortgage takes precedence
Payoff Statement - Answer Provides homeowner proof the mortgage is paid off
Constructive Note - Answer Legal presumption that anything recorded in a public record can be
known by anyone
Actual Note - Answer Direct knowledge that one has of the property
Inquiry Note - Answer Information that should compel a reasonable person to make further
inquiries about some aspect of the property
Title Record - Answer Serves as a central repository of information about a parcel of land
SRP
Service Release Premiums - Answer Payment received by lender after selling a loan Based on
market value
GNMA
Government National Mortgage Association - Answer Created in 1968, goal to expand
affordable housing under HUD
FNMA
Federal National Mortgage Association - Answer Created 1968 works with Fannie Mae to
increase affordable lending
FHA
Federal Housing Administration - Answer Insures banks real estate loans and charges borrowers
a small premium
HELOC
, NMLS SAFE EXAM CONTAINING
QUESTIONS AND ANSWERS
Home Equity Line of Credit - Answer A loan in which the lender agrees to lend a maximum
amount within an agreed period
and is also an open-ended mortgage transaction that is secured
HECM
Home Equity Conversion Mortgage - Answer A FHA insured reverse mortgage that allows the
conversion of equity in a home to cash
Balloon Mortgage - Answer A mortgage in which a large portion of the borrowed principal is
repaid in a single payment at the end of the loan period and does not amortize
ARM Interest Rate Adjustment - Answer Margin + Interset = Rate
COFI
Cost of Fund Index - Answer Regional average of interest expenses incurred by financial
institutions which in turn is used as a base for calculating variable rate loans
ARM
Adjustable Rate Mortgage - Answer Loan that is lower than fixed rate in beginning
Loan payment changes over time
Adjustable caps that vary
Used to obtain a higher loan amount
Fixed Rate - Answer Interest rate that remains the same over the life of the loan
Non-Conforming Loan - Answer Does not meet Freddie Mac or Fannie Mae guidelines
Conforming Loan - Answer Conforms to terms and conditions set by government
Conventional Loan - Answer Not guaranteed or insured by the government but can still follow
federal guidelines
Acceleration Clause - Answer Accelerated loan repayment if property is in default
Exculpatory Clause - Answer Relieves one party form liability due to actions of another party
Defeasance Clause - Answer Creditor can obtain title without foreclosure process
Late Payement Penalty - Answer When fees are attached to late payment
Pre-Payment Penalty - Answer Fixed sum added to loan if loan is paid off early
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